Question

Harbour Company makes two models of electronic tablets, the Home and the Work. Basic production information follows:
   

	Home			Work
Direct materials cost per unit	$	38		$	71
Direct labor cost per unit		16			40
Sales price per unit		354			581
Expected production per month		780	units		330	units

    

Harbour has monthly overhead of $173,500, which is divided into the following cost pools:

Setup costs	$	73,600
Quality control		56,400
Maintenance		43,500
Total	$	173,500

        

The company has also compiled the following information about the chosen cost drivers:      

	Home	Work	Total
Number of setups	45	47	92
Number of inspections	310	395	705
Number of machine hours	1,400	1,500	2,900

e D chapter 4 Graded Assignment + Harbour Company Makes TON Harbour Company Makes TwoM X x → C ⓘ Not secure | ezto.mheducation.com/hm.tpx?--0.4278013202795721-1555707705908 volue: 30.00 points Harbour Company makes two models of electronic tablets, the Home and the Work Basic production information follows Home Work $ 38 71 40 581 Direct materials cost per unit Direct labor cost per unit Sales price per unit Expected production per month 16 354 780 units 330 units Harbour has monthly overhead of $173,500, which is divided into the following cost pools Setup costs Quality control Maintenance S 73,600 56.400 43.500 S 173,500 Total The company has also compiled the following information about the chosen cost drivers. Home Work Total 92 310 395 705 ,400 1,500 2.900 Number of setups Number of inspections Number of machine hours 45 47 Required: 1. Suppose Harbour uses a traditional costing s answers to the nearest whole dollar a with machine hours as the cost driver. Determine the amount of overhead assigned to each product line. (Do not round intermediate calculations and round your final Home Model Work Model: e D chapter 4 Graded Assignment + Harbour Company Makes TON Harbour Company Makes ToM × x ← → Not securel eztomheducation.com/hm.tpx?-=0.427801320279572.1555707705908 2. Calculate the production cost per unit for each of Harbour's products under a traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places.) Home Work Unit Cost 3. Calculate Harbour's gross margin per unit for each product under the traditional costing system. (Round your intermediate calculations and final answers to 2 decimal places.) Work Gross Margin 4. Select the appropriate cost driver for each cost pool and calculate the activity rates if Harbour wanted to implement an ABC system. Setup Costs Quality Control e D chapter 4 Graded Assignment + Harbour Company Makes TON Harbour Company Makes ToM × x KC Not secure ezto.mheducation.com/hm.tpx?-0.4278013202795721 1555707705908 5. Assuming an ABC system, assign overhead costs to each product based on activity demands. Ass To Home To Work Setup Costs Quality Control Total Overhead CostS 6. Calculate the production cost per unit for each of Harbour's products in an ABC system. (Round your intermediate calculations and final answers to 2 decimal places.) Work Unit Cost 7. Calculate Harbour's gross margin per unit for each product under an ABC system. (Round your intermediate calculations and final answers to 2 decimal places.) Home Work Gross Margin C Harbour Company Makes Two NX C Harbour Company Makes Two xChapter 4 Graded Assignmentx+ KC Not secure ezto.mheducation.com/hm.tpx?-0.4278013202795721 1555707705908 Unit Cost T. Calculate Harbour's gross margin per unit for each product under an ABC system. (Round your intermediate calculations and final answers to 2 decimal places.) Home Work Gross Margin 8. Compare the gross margin of each product under the traditional system and ABC. (Round your answers to 2 decimal places.) Home Work Gross Margin (Traditional) Gross Margin (ABC) References eBook &Resources Leaming Objective: 04-01 Assign indirect costs to products or services using a single volume- based cost driver Leaming Objective: 04-04 Assign indirect costs to products or services using activity rates Difficulty: 3 Hard Learning Objective: 04-03 Assign indirect costs Learning Objective: 04-06 Compare the results of a volume-based cost system to activity-based to activity cost pools and select a cost driver for costing

Answer 1

Solution $173,500 Manufacturing overheads per month- Number of machine hours available 2900 hours Total manufacturing overheads Machine hours overhead rate based on machine hours = 173,500 2900 $59.83 Home Model Work Model Number of machine hours used Overhead rate Total overheads ass 1400 9.83 83,759 1500 9.83 89,741 ed Overhead assigned 83,759 $89.741 Home Model Work Model $173,500 Total Overhead cost Requirement 2 Calculate the unit for each of Harbo uction Work Model Home Particulars Model $38.00 16.00 $71.00 40.00 Direct materials Directlabor - Home model ($83,759/780 units) $107.38 Work model (589,741/330 units Total production cost per unit 161.38 382.94 Home Work $161.38 Unit cost $382.94

Work Model Home Particulars Model $354.00 161.38) 192.62 $581.00 382.94 198.06 Sale price per unit Less: Production cost per unit Gross margin per un it Home Work $19806 $192.62 Gross margin Requirement 4: Calculation of activity rat Overhead rate for each activity No. of Activity Cost Poo Activity Cost Drivers overhead cost activity No. of setups No. of inspections No. of machine hours $73,600 $56,400 43,500 173,500 $800.00 $80.00 15.00 Setup costs Quality control Maintenance 92 705 2900 $800.00 $80.00 $15.00 No. of setups No. of inspections No. of machine hours Setup costs Quality control Maintenance Home Model Work Model Activity Driver Activity rate Activity Total Overhead cost Activity Total Overhead cost overhead cost per unit overhead costper unit use use (d-bxc) (e-d 780) (g bxf) (h-g/330) 46.15 Setup costs Quality control Maintenance 800 80 15 45 310 1400 36,000.00 24 800.00 21,000.00 81,800.00 47 37,600.00 31,600.00 22,500.00 91,700.00 113.94 95.76 68.18 277.88 31.79 395 $104.87

Overhead assigned to Home Overhead assigned to Work Setup costs Quality control Maintenance Total overhead cost 36,000 24,800 21000 $81,800 37,600 31,600 $91,700 Work Model Home Particulars Model $38.00 $16.00 $71.00 $40.00 Direct materials Direct labor - Home model ($81,800 780 units) 104.87 Work model ($91.700 /330 units Total 277.88 uction ost per unit 158.87 388.88 Home Work $38888 Unit cost $158.87 Work Model Home Particulars Model $354.00 $581.00 388.88 192.12 Sale price per unit Less: Production cost per unit Gross margin per unit $195.13 Home Work $195.13 $19212 Gross margin Home Work Gross Margin (Traditionall) Gross Margin (ABC) $19262 $198.06 195.13 192.12